Apple, Scandinavian consumer ombudsmen talk iTunes

Some Scandinavian governments are troubled by the Apple-iTunes music ecosystem …

Today is Apple's sit-down with the consumer Ombudsmen of Denmark, Norway, and Sweden over the issue of iTunes licensing and DRM. In June, the iPod maker was notified by the Consumer Ombudsman of Norway that its FairPlay DRM unfairly restricted consumer choice, that the terms and conditions for buying music from iTunes Music Store were too restrictive, and that its pricing was discriminatory. Consumer ombudsmen in Sweden and Denmark came to the same conclusion.

Apple responded at the beginning of August, saying that it was unwilling to license FairPlay to competitors. The company did say that it was willing to make some modifications to the license agreement for iTunes and clarify the terms and conditions under which customers browse iTMS. Apple also suggested to the Norwegian Ombudsman that DRM-protected material falls outside of the authority of the Scandinavian consumer groups because it is governed by EU directives on copyright.

If the online music giant and the Scandinavian consumer groups are unable to come to an agreement, Apple could pull out of those countries. Given their relatively small population, it wouldn't cause too much damage to Apple's bottom line. However, bailing out of markets each time a government starts becoming interested in FairPlay and iTMS becomes impractical at some point.

How can Apple respond? First of all, they can back down a bit on the iTunes license agreement. While the cooling-off period cited for purchases in Norwegian law is a no-go, primarily because customers would be able to burn copies of the music to CD and then "return" the file to Apple, there is no good reason why consumers shouldn't be able to sue if iTunes causes damages to the host computer's OS. Additionally, Apple could back down on its insistence that it can change the usage rules after purchase.

Other things that the consumer groups in Scandinavia have criticized are outside of Apple's control. In particular, the geographical restrictions in place at iTMS echo those set by the music industry for physical CDs, and Apple has little leeway in regards to that.

The biggest sticking point is FairPlay, which is arguably the key to Apple's success. Some sort of DRM is necessary to operate an online music store, simply because the labels insist on it. That is nonnegotiable. Opening up FairPlay for licensing by other companies, which would allow iTMS tracks to be played on other digital music players, is entirely at Apple's discretion—but it is very difficult to conceive of Apple ever doing that voluntarily.

After the two-day meeting, a decision from the consumer Ombudsmen is expected at some point in September, possibly after further consultations with Apple.